Case Name:   Bautista v. America’s Servicing Company, et al.

Case No.:       1-14-CV-263694

After full consideration of the arguments and authorities submitted by each party, the court makes the following rulings:

In the first amended complaint (“FAC”), plaintiff Salve B. Bautista (“Plaintiff”) asserts causes of action against defendants America’s Servicing Company (“ASC”), HSBC Bank USA, N.A. (“HSBC”) as trustee for Deutsche Alt-B Securities Mortgage Loan Trust Series 2007-AB1 Pass-Through Certificates (“DBALT”), and Mortgage Electronic Registration Systems, Inc. (“MERS”) (collectively, “Defendants”) and defendant NDEX West, LLC (“NDEX”) for (1) wrongful foreclosure, (2) breach of express agreement, (3) breach of implied agreement, (4) violation of Civil Code section 2923.5, and (5) violation of Business and Professions Code section 17200 (“the UCL”).  In support of her claims, Plaintiff alleges the following:

Plaintiff executed a note (“the Note”) secured by a deed of trust (“DOT”) on her property (“the Property”) naming MERS as the beneficiary.  (FAC, ¶¶ 2, 7-8, & 14.)  Defendants and NDEX initiated a foreclosure proceeding that was unlawful because “they were not the true holders of beneficial interest in the [DOT]” and because they breached the Home Affordable Modification Program (“HAMP”) guidelines; Defendants were not “true” beneficiaries of the DOT—and they breached the DOT and the pooling and service agreement (“Trust PSA”)—because their attempts to transfer an interest in the DOT to DBALT were invalid and void. (Id., ¶¶ 3, 15-16, 18-19, & 22, citing Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1079 [“Glaski”].)  NDEX recorded a notice of default (“NOD”) and notice of trustee’s sale (“NOTS”), but the NOD and NOTS “are based on void assignments” and are also “void and invalid.”  (Id., ¶¶ 17, 21, & 25.)  In addition, the NOD, NOTS, and recorded assignments are invalid because “HSBC employed robo-signers.”  (Id., ¶¶ 40-41 & 54.)  HSBC transferred servicing rights to ASC before July 2010, and Plaintiff applied for a loan modification with ASC, but “Defendants negligently misrepresented the status of [her] loan application” because ASC failed to inform her of its decision for three years.  (Id., ¶¶ 23-24 & 42.)  Defendants also “breached their agreement to perform a loan modification review pursuant to HAMP guidelines” by dual-tracking.  (Id., ¶ 42.)  Furthermore, due to the assignments, Plaintiff made payments that were not credited towards her debt.  (Id., ¶¶ 46, 64-65, & 74.)

Defendants move to strike portions of the FAC on the grounds that those portions are irrelevant, false, and improper matter that violate the Court’s order on Defendants’ demurrer to the complaint (“Prior Order”).  (See Code Civ. Proc. [“CCP”], §§ 435-436.)

Defendants’ request for judicial notice of the Prior Order is GRANTED.  (See Evid. Code, § 452, subd. (d); see also Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [court orders are judicially noticeable].)

Defendants argue that FAC paragraphs 3, 5-6, 15-16, 18-19, 22-25, 27-42, 43 (in part), 44, 46, 48, 51-54, 55 (in part), 56-60, 61 (in part), 62-63, 64 (in part), 66, 69 (in part), 70 (in part), 70(a) (in part), 70(b), 71, 72 (in part), 73, 74 (in part), 76, 78 (in part), 79, 83-84, and 87, and paragraphs 1-5 and 6-7 from the prayer for relief should be stricken because (1) Plaintiff’s allegations do not conform with the Prior Order, (2) Plaintiff is not authorized by statute or by contract to seek attorney’s fees, and (3) the request for punitive damages is not supported by sufficient factual allegations.

1. Conformity With the Prior Order

The Prior Order sets forth the Court’s rulings on Defendants’ demurrer to Plaintiff’s initial complaint.  In the complaint, Plaintiff asserted claims for (1) wrongful foreclosure, (2) promissory estoppel, (3) negligent misrepresentation, (4) breach of express agreement, (5) breach of implied agreement, (6) slander of title, (7) violation of Civil Code section 2923.5, (8) violation of the Racketeering Influence and Corrupt Organization Act, and (9) violation of the UCL.  (Prior Order, at p. 2:22-27.)  The Court overruled the demurrer as to first, fourth, fifth, seventh, and ninth causes of action, sustained the demurrer with leave to amend as to the second and third causes of action, and sustained the demurrer without leave to amend as to the sixth and eighth causes of action.  In addition, the Court stated the following:

[A]lleging that a deed of trust or promissory note is void because an assignment of interest in the deed of trust or promissory note is invalid and void does not support any cause of action, because a borrower lacks standing to challenge such an assignment.  ([Citation].)  Plaintiff relies on [Glaski] for the proposition that a borrower has standing to challenge an allegedly void assignment; however, the Glaski holding is a distinct minority view and most federal district court cases have criticized it or declined to follow it.  ([Citations].)  [¶] This Court, too, declines to follow Glaski.  A borrower also typically lacks standing to challenge compliance with . . . HAMP.  ([Citations].) . . . .  [A]s to those causes of action for which demurrer is overruled, the Court expects Plaintiff to delete allegations of invalid assignments, claims of “robo-signing,” and violations of HAMP when an amended complaint is filed . . . .

(Prior Order, at pp. 3:10-4:19, emphasis added.)  Thus, to the extent the FAC includes allegations of invalid assignments, “robo-signing,” and violations of HAMP guidelines, it does not conform to the Prior Order.

In FAC paragraphs 3, 15-16, 18-19, 22, 27-40, 43-44, 46, 51-63, 70(a), 71, 73-74, 78-79, and 83-84, Plaintiff includes allegations pertaining to invalid assignments of the DOT.  Also, in FAC paragraphs 40-41 and 54, Plaintiff alleges that HSBC engaged in “robo-signing.”  Therefore, FAC paragraphs 3, 15-16, 18-19, 22, 27-41, 43-44, 46, 51-63, 70(a), 71, 73-74, 78-79, and 83-84 contain allegations that do not conform to the Prior Order and should be stricken.  Given that Plaintiff lacks standing to challenge the validity of the assignments and therefore the validity of the assignments cannot be used as a basis for a cause of action (see Prior Order, at pp. 3:10-4:19), there is no reasonable possibility that an amendment could cure these defects.

Accordingly, the motion to strike is GRANTED WITHOUT LEAVE TO AMEND as to FAC paragraphs 15-16, 18-19, 22, 28-40, 44, 51-54, 57-60, 62-63, 71, 73, and 83-84 in their entirety and FAC paragraph 3 to the extent it states “they were not the true holders of beneficial interest . . . security interest in the Subject Property”; FAC paragraph 27 to the extent it states “were invalid and wrongful because no Defendant was the true holder of beneficial interest under Plaintiff’s Deed of Trust at that time, rendering the trustee’s sale void ab initio”; FAC paragraph 43 to the extent it states “[t]he recorded documents also demonstrate Plaintiff’s grounds for wrongful foreclosure . . . give rise to the presumption that these documents were fabricated and created for the purpose of an illegal sale” and “Plaintiff herein attacks the validity of the underlying debt”; FAC paragraph 46 to the extent it states “In an effort to legalize the foreclosure Defendants attempted an illegal transfer to the Trust Pool on or before April 13, 2007,” and “[s]ince the chain of title to the Deed of Trust was irreversibly broken after the initial attempted transfer on April 13, 2007”; FAC paragraph 55 to the extent it states “[t]herefore, as entities that were never the holder of beneficial interest . . . breached that provision in their attempts to do so”; FAC paragraph 61 to the extent it states “the certificate holders . . . the same as the Start-up day”; FAC paragraph 56 at p. 15:18-19; FAC paragraph 64 to the extent it states “with the true Beneficiary . . . without legal capacity to do so”; FAC paragraph 70 to the extent it states “and with the parties to the [Trust PSA] of which Plaintiff is a third party beneficiary”; FAC paragraph 70(a) to the extent it states “[t]here is no evidence . . . due to a valid transfer or assignment of such interest”; FAC paragraph 74 to the extent it states “with the true Beneficiary . . . without legal capacity to do so”; FAC paragraph 78 to the extent it states “[a]s Plaintiff . . . which Plaintiff contests”; and FAC Paragraph 79 to the extent it states “Defendants were never entities authorized to initiate foreclosure proceedings against Defendants.”

FAC paragraphs 3 and 42 include allegations of Defendants’ failure to comply with HAMP, but Plaintiff does not allege that Defendants made an agreement with her to comply with the HAMP guidelines.  Although these allegations do not conform with the Prior Order, it is possible that Defendants made a separate promise to Plaintiff—as opposed to an agreement to which Plaintiff was merely a third party beneficiary—that would obligate them to comply with the HAMP guidelines.  Thus, the motion to strike as to alleged HAMP violations in FAC paragraphs 3 (to the extent it states “Defendants breached their duties pertaining to loan modifications . . . Defendants failed to adhere to the requirements of HAMP set forth by the United States Government”) and 42 (in its entirety) is GRANTED WITH 10 DAYS’ LEAVE TO AMEND.

With respect to FAC paragraphs 5 and 6 and paragraphs 1-4 in the prayer for relief, Defendants argue that “Plaintiff continues to request relief . . . in the form of invalidating the power of sale in the deed of trust and quieting title exclusively in favor of Plaintiff as the result of the allegedly invalid assignments.”  (Defendants’ P&A, at p. 2:20-23.)  However, FAC paragraphs 5 and 6 merely “request[] a judicial determination and declaration of [the parties’] rights with respect to the [Property] and its underlying Note and [DOT],” and “ask this Court for a declaration of interests and for cancellation of the mortgage instruments based on the following facts.”  These allegations are proper and conform to the Prior Order.  In the prayer for relief, Plaintiff seeks an order declaring that certain recorded instruments are invalid, but she does not allege that the instruments are invalid.  Therefore, the motion to strike as to FAC paragraphs 5 and 6 and paragraphs 1-4 in the prayer for relief is DENIED.

Turning to FAC paragraphs 23-25, Defendants assert that these claims are based on an alleged violation of HAMP guidelines and should be stricken.  However, these allegations do not mention HAMP.  Also, Defendants argue that FAC paragraphs 69 (to the extent it states “Plaintiff alleges on information and belief that [Plaintiff and the lender] are third-party beneficiaries subject to a PSA pursuant to the purported sale of [the DOT] and [the Note] by [the lender] to HSBC as Trustee to [DBALT] on or around 2007”) and 72 (to the extent it states “if the power of sale clause is enforceable”) should be stricken because they include claims “that the securitization was improper.”  (Defendants’ P&A, at p. 2:17-18.)  To the contrary, nothing in these paragraphs claim that the securitization is improper.  Accordingly, these allegations are proper, and the motion to strike as to FAC paragraphs 23-25, 69, and 72 is DENIED.

1. Attorney’s Fees

Although Defendants state in their notice of motion that they seek an order striking FAC paragraphs 48, 66, 76, 87, and prayer paragraph 6, they only submit arguments supporting their motion as to FAC paragraph 87.

Since FAC paragraphs 48, 66, 76, and prayer paragraph 6 do not appear to contain “irrelevant, false, or improper matter” and appear to conform with applicable laws, rules, and orders (see CCP, § 436), the motion to strike these paragraphs is DENIED.

In FAC paragraph 87, Plaintiff requests attorney fees in connection with her UCL claim, and states that she is entitled to recover attorney fees “[p]ursuant to [CCP] Section 1021.5.”  Defendants argue that CCP section 1021.5 does not authorize the recovery of attorney’s fees in connection with a UCL claim, and Plaintiff “alleges no facts which demonstrate that [she] has succeeded in enforcing an important right affecting the public interest.”  (Defendants’ P&A, at p. 4:12-16.)  The UCL does not independently entitle a prevailing party to attorney’s fees; however, “[i]f a plaintiff prevails in an unfair competition law claim, [then] it may seek attorney fees as a private attorney general pursuant to Code of Civil Procedure section 1021.5.”  (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1179.)  Since Plaintiff may recover attorney’s fees under CCP section 1021.5 in connection with her UCL claim, the motion to strike as to FAC paragraph 87 is DENIED.

III.       Punitive Damages

Defendants assert that paragraph 7 from the prayer for relief in the FAC—which requests punitive damages—should be stricken because Plaintiff fails to adequately allege facts supporting a claim for punitive damages.  Punitive damages are not recoverable in connection with Plaintiff’s second and third causes of action because those claims are for breach of contract.  (See Civ. Code, § 3294, subd. (a) [authorizing punitive damages “[i]n an action for the breach of an obligation not arising from a contract”].)  Plaintiff’s fifth cause of action is for violation of the UCL, and punitive damages are not recoverable under the UCL.  (See Bus. & Prof. Code, §§ 17202 [authorizing injunctive relief] & 17203 [authorizing disgorgement]; see also Korea Supply Co. v. Lockheed Martin Corp. 29 Cal.4th 1134, 1148 [“attorney fees and damages, including punitive damages, are not available under the UCL”].)  With respect to her first and fourth causes of action, the majority of Plaintiff’s supporting allegations pertain to the allegedly invalid/void assignment of interest in the DOT.  As discussed above, those allegations are improper.  Plaintiff’s only other supporting allegations are that some documents were recorded late (FAC, ¶ 43) and, as the result of the assignments, she made her monthly payments to the wrong entities and her payments were not credited towards her debt (id., ¶ 46).  These allegations do not indicate that Defendants are “guilty of oppression, fraud, or malice.”  (Civ. Code, § 3294, subds. (a) [punitive damages only recoverable if the plaintiff shows by clear and convincing evidence that the defendant is guilty of oppression, fraud, or malice] & (c) [defining malice, fraud, and oppression].)

In light of the foregoing, the motion to strike as to paragraph 7 of the prayer for relief in the FAC is GRANTED WITH 10 DAYS’ LEAVE TO AMEND so that Plaintiff may add allegations to support her punitive damages claim.